The Real Estate Investment Trusts (REITs) of Singapore have strengthened and are now gearing to hit the acquisition trail, analysts claimed.
Singapore’s REITs have refinanced debt and recapitalised their balance sheets, which will help them to post better figures this year.
After a challenging 2009, REIT managers have brought down their gearing levels. However, observers stated that REITs are now more relaxed at raising their debt to assets going forward.
With the country’s economy posing a strong comeback from 2009’s economic strife, analysts said that REITs are aggressively acquiring again.
In 2009, the value of the sector slumped 60 percent and debt levels sky-rocketed.
“They are acquiring properties, assets, largely because they view the outlook as stable. And the capital market is very liquid, so the access to funds is there. They are adjusting their gearing target ratio slightly upwards,” noted Loy Wee Khim, associate director from Standard & Poor’s.
Analysts expect that the REITs’ average gearing levels are currently set to increase from 31 percent to up to 39 percent in the near term. This is because the REITs could raise more debt to fund expansion and are more comfortable with their capital positions.
However, observers see some uncertainties on the horizon.
“In terms of returns, we are looking at 10 per cent returns over the next 12 months. Macro economic concerns are on the front seat again so we’re seeing a lot of volatility. What we’re thinking is that investors will probably ascribe a higher risk premium on the REITs in the near term,” said Meenal Kumar, an analyst from OCBC Investment Research.